Halcón Planning a Chapter 11 Restructuring

Halcón Resources Corporation has reached an agreement in principal on terms of a plan to restructure its balance sheet with select holders of its 13.0% 3rd Lien Notes due 2022, its three tranches of senior unsecured notes comprised of its 9.75% Senior Notes due 2020, its 8.875% Senior Notes due 2021, and its 9.25% Senior Notes due 2022, its 8.0% Convertible Note due 2020 and its 5.75% Perpetual Convertible Preferred Stock .

The Restructuring Plan, if implemented, will result in the elimination of approximately $1.8 billion of debt and approximately $222 million of Preferred Equity, and will reduce the Company’s ongoing annual interest burden by more than $200 million.  As of May 18, 2016, holders representing a majority of the value outstanding in each class of Affected Stakeholders have indicated their willingness to support the Restructuring Plan.  This agreement is subject to the negotiation and execution of certain definitive documentation, including a Restructuring Support Agreement (“RSA”) to be entered into with select Affected Stakeholders.  The Company expects the RSA to be executed in the near term, but there is no assurance this will occur.

Under the Restructuring Plan, all Halcón debt junior in seniority to the Company’s existing 8.625% 2nd Lien Notes due 2020 and its 12% 2nd Lien Notes Due 2022 (“2L Notes”) will be eliminated, as will all of the Preferred Equity.  The Restructuring Plan contemplates that the Affected Stakeholders will receive newly issued common shares in reorganized Halcón, warrants and/or cash in exchange for their existing securities.  The table below summarizes the treatment of the Affected Stakeholders in addition to other stakeholders under the Restructuring Plan.

Stakeholder Treatment
 Senior Secured Revolver      – New or amended reserve based facility to be provided by existing lenders
 2L Notes    – Unaffected and reinstated
 3L Notes    – Fully equitized into 76.5% of the pro forma equity
– Receive $50.0 MM in cash plus accrued and unpaid interest through March 31, 2016
 Unsecured Notes    – Receive 15.5% of the pro forma equity
– Receive warrants for 4.0% of the pro forma equity (4 year term, $1.33 BN equity strike)
– Receive $37.6 MM in cash plus accrued and unpaid interest through May 15, 2016
 Convertible Note    – Receive 4.0% of the pro forma equity
– Receive $15.0 MM in cash
– Receive warrants for 1.0% of the pro forma equity (4 year term, $1.33 BN equity strike)
 Preferred Equity     – Receive $11.1 MM cash
 Existing Common Equity    – Receive 4.0% of the pro forma equity

Following the execution of the RSA, the Company plans to solicit the support of additional Affected Stakeholders for the Restructuring Plan.  If certain voting thresholds are satisfied through the solicitation process, the Restructuring Plan will be executed through an accelerated pre-packaged Chapter 11 bankruptcy filing.  The proposed Restructuring Plan is subject to definitive documentation as well as court approval, so there can be no assurance the Restructuring Plan will be consummated on the terms set forth above and the final terms of any restructuring transaction could be materially different. The Company plans to operate as usual during the restructuring process and will pay all suppliers and vendors in full under normal terms for goods and services provided.

Advisors

PJT Partners is acting as financial advisor, Weil, Gotshal & Manges LLP is acting as legal counsel and Alvarez & Marsal is acting as restructuring advisor to the Company in connection with the Restructuring Plan.  Houlihan Lokey Capital, Inc. is acting as financial advisor and Latham & Watkins LLP is acting as legal advisor to the select ad hoc committee of 3L Notes.  Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as legal advisor to the select ad hoc committee of Unsecured Notes.

Additional Information

More detailed information of the Restructuring Plan will be made available if and when the Company and select Affected Stakeholders enter into the RSA which will be filed on Form 8-K with the U.S. Securities and Exchange Commission (“SEC”).


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